26.04.2013

The government is developing a draft law about setting up a special tax rate of value added tax (VAT) on drugs. Now the VAT rate on medicines is 0%, that is actually tax is not charged. According to sources, "Capital", the government wants to raise it to the level of 5-7% . ¹

Setting up of VAT on medicines used in many EU and the CIS countries. It should be noted that this tax is working together with reimbursement of the cost of drugs for certain categories of patients, allowing treatment for chronic patients and those with low incomes.

Prior to the publication of the draft law it is early to make an assumption about the amount of VAT and its application. At the same time, the pharmaceutical market participants need to start working on ways to mitigate the price in the event of the introduction of VAT on medicines, reducing costs at all stages of production and promotion of drugs. According to Igor Vovkodav, director of company "Farm-ROST": "marketing costs at a different stage of the product life cycle can range from 60% to 20% of the costs. The introduction of VAT will require optimizing costs on marketing, which would require the revision of the sales plans and budgets for market participants. One of the ways to solve this problem is the active using of outsourcing services of pharmaceutical marketing companies".

Reduced marketing costs through the introduction of IT solutions, such as CLM-closing loop marketing, would require a large initial investment in software, training, and recipients of information. At the same time, physicians and pharmacists are not yet fully prepared to solutions for objective reasons.

Conclusions:

1. The introduction of VAT on medicines will lead to higher prices.

2. Pharmaceutical market participants is advisable to start preparatory work for such scenario of the market development.

3. Outsourcing pharmaceutical marketing companies should prepare for an increase in demand and work to reduce the cost of their services.

¹ The state intends to collect from the pharmaceutical market $ 200 million a year. The tax rate will include in the cost of drugs / Dmitry Ulyanitsky / "Capital" business newspaper / April 17, 2013, Wednesday, № 008 (008) 

Analitycal service of Farm-ROST